Asked by madisyn collier on Jun 20, 2024
Verified
Refer to Figure 15.2. In this monopolistically competitive industry, in the long run
A) firms will enter until all firms earn a normal profit.
B) firms will continue to earn economic profits.
C) demand for the product will decrease so that profits are decreased.
D) the government will impose price controls to eliminate any economic profits.
Monopolistically Competitive
Describes a market structure where many firms sell products or services that are similar but not perfect substitutes, leading to competitive pricing and differentiation.
Normal Profit
The minimum profit necessary for a company to remain competitive in the market, accounting for the cost of opportunity.
- Explore how entry and exit of firms in the long run affects market outcomes in monopolistically competitive markets.
Verified Answer
MZ
Micah ZandersJun 22, 2024
Final Answer :
A
Explanation :
In a monopolistically competitive market, firms will enter the market when there are economic profits, leading to increased competition. This process continues until the economic profits are eroded away, leaving firms to earn just a normal profit in the long run.
Learning Objectives
- Explore how entry and exit of firms in the long run affects market outcomes in monopolistically competitive markets.